Business Daily #1285 April 28, 2017

Macau cultural offer will trap you this weekend ... unless you want to bask in the sun Consigliere Pages 8 & 9

Friday, April 28 2017 Year VI Nr. 1285 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kam Leong MARKET TRENDS

Mainland investors to increase use of robot advisors Page 10

Trade

www.macaubusinessdaily.com

Politics

Luxury market boosts local imports by 19 pct in March Page 6

Government probes culture heads Page 2

Gaming

Ng Lap Seng case

Iao Kun now operates as LiNiu Technology Page 6

Judge disallows Ng’s post-arrest statements Page 5

Economic Upturn Filters Through Employment

Monthly earnings of local residents increased MOP1,000 in Q1.

Reaching MOP19,000. Although general median earnings – including those of non-residents – remain unchanged from a quarter ago.

The jobless rate hovers at 2 pct. While the gaming industry’s employed population has dipped. Page 5

EU pronounces on local market Mass boosts Sands, MGM earnings

International Relations The European Union hopes to strengthen exchanges between European businesses and local authorities. Its latest report on the MSAR notes EU-Macau relations continued to flourish in 2016. Although European businesses continue to encounter difficulties.

With the usual suspect of work permits for expats cited. Page 3

Sands China saw total net revenue increase 15.3 pct y-o-y in Q1. While MGM China posted growth of 7.1 pct. Both claim the revenue boost derived from mass market y-o-y double-digit increases. In particular, Sands attributes its improved performance to The Parisian Macao.

China stabilising, slowly

Gaming Page 7

HK Hang Seng Index April 27, 2017

24,698.48 +120.05 (+0.49%) Worst Performers

AIA Group Ltd

+6.24%

Ping An Insurance Group Co

+1.03%

Sands China Ltd

-3.53%

Bank of Communications

AAC Technologies Holdings

+1.69%

Hengan International Group

+0.86%

Galaxy Entertainment Group

-2.60%

Hang Seng Bank Ltd

-0.88%

Want Want China Holdings

+1.25%

China Mengniu Dairy Co Ltd

+0.80%

Geely Automobile Holdings

-1.48%

China Overseas Land &

-0.87%

Cathay Pacific Airways Ltd

+1.25%

CLP Holdings Ltd

+0.67%

China Petroleum & Chemical

-1.40%

Link REIT

-0.71%

Tencent Holdings Ltd

+1.24%

HSBC Holdings PLC

+0.47%

Lenovo Group Ltd

-1.38%

CITIC Ltd

-0.71%

20° 23° 22° 24° 23° 26° 23° 27° 23° 27°

-1.15%

Today

Source: Bloomberg

Best Performers

Sat

Sun

I SSN 2226-8294

Mon

TUE

Source: AccuWeather

Industrial data In the first three months of the year, profits of major industrial firms rose 28.3 pct y-o-y. National Bureau of Statistics figures suggest stabilisation. But at a slower pace. Page 10

2 Business Daily Friday, April 28 2017

Macau Customs

New clearance method for Super Bridge

Wong Sio Chak, Secretary for Security

residents to use their Mainland Travel Permit for Hong Kong and Macau Residents to enter the Mainland and to use Macau The city’s Secretary for Security, Wong Resident Identity Card upon returning to Sio Chak, said on Wednesday that a joint boundary clearance system will be adapted Macau. The government expects more details of the system to be finalised next for people travelling between Macau and month. The proposal was part of the results Zhuhai via the Hong Kong-Zhuhai-Macau achieved in discussions between the Macau Bridge. The clearance system would be available only for local residents registered Government and authorities in Beijing and in Zhuhai, the official added C.U. to use e-Channel services, enabling local

Administration

Gov’t initiates investigations into culture heads

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ecretary for Social Affairs and Culture Alexis Tam Chon Weng has proposed to initiate disciplinary procedures against the previous president of the Cultural Affairs Bureau, Guilherme Ung Vai Men, as well as the Bureau’s incumbent president and vice president Leung Hio Meng and Chan Peng Fai, for the Bureau’s illegal method of recruiting workers from 2010 to 2015.

The Secretary disclosed yesterday that there are signs proving that the then president and the current heads of the Bureau had acted contrary to the obligations of leadership and civil servants, adding the decision was made based upon studies with the entire team and legal consultants.

The result of the investigations against the three will be announced to the public when available, said the Secretary.

Leung Hio Meng and Chan Peng Fai were both vice presidents of the Bureau during the period.

The illegal recruitment methods adapted by the Cultural Affairs Bureau were revealed by the Commission Against Corruption (CCAC) in

Alexis Tam Chon Weng, Secretary for Social Affairs and Culture

an investigation report last month.

The report said the Bureau had been avoiding launching open or central recruitment systems to hire its workers in a regulated way, doing

so instead via the acquisition of services.

On Monday, Mr. Leung said in a press briefing that the recruitments were not related to any transfer of

benefits or other illegal activities, adding such methods of recruitment had long been a norm during his administrative career since the previous Portuguese Administration. C.U.

Legislation

Gov’t to extend temporary income subsidy The government is keeping the scheme despite the fact that demand has fallen drastically Sheyla Zandonai sheyla.zandonai@macaubusiness.com

The Executive Council announced a bill to extend the implementation of Temporary Measures for the Income Subsidy for this year, although the number of applications received by the authorities registered a sharp decrease year-on-year in 2016.

According to data provided by the Macau SAR Government in a press conference yesterday, an average of some 340 people applied for the subsidy per quarter during the whole year of 2016, as compared to the quarterly average of 1,197 requests received by the authorities in 2015.

“The reduction [in demand] is a result of the implementation of the minimum wage policy,” said Council spokesperson Leong Heng Teng. “As socio-economic conditions of the population improve, requests for the

subsidy tend to drop.”

The scheme, launched by the government in 2008, and saw its effective period extended every year since, aims to subsidise the city’s lowi ncome earners so that their monthly income reaches MOP5,000 (US$625).

The total amount of subsidy paid to beneficiaries during the whole year of 2016 reached MOP9.3 million. The amount of subsidy distributed per capita corresponded to MOP7,068.

The bill also suggests loosening the requirements for the disabled to apply for the subsidy, lowering minimum working hours required per month to 128 hours.

Currently, all permanent residents aged 40 or above can apply for the subsidy if their total quarterly income is less than MOP15,000 and if they have accumulated at least 152 working hours per month (or 128

hours for those in the textile, garment or leather industry).

The Executive Council also announced a bill amending the structure of the Unitary Police Service (SPU).

Following the implementation of

the new structure, the SPU will have one Commander General and three assistants whilst subordinating bodies will be increased to seven from the current six.

The operation of the Security Council of Service, which advises and supports the Chief Executive on internal security matters, will remain unchanged, according to the bill.

Leong Heng Teng, spokesperson of the Executive Council

Financial aid

Legislation for SME’s second aid bill this year The bill allowing the government to provide more aid to local SMEs will be sent for legislative procedures within this year, said the Deputy Director of Macao Economic Services (DSE) Lau Wai Meng yesterday.

According to the official, the bill has already been drafted, claiming it is not only about what support the government can offer to SMEs but also how it can improve one’s products and services in order to

attract clients.

Speaking on the sidelines yesterday of a forum held by Aliança de Povo de Instituição de Macau, Mr. Lau remarked that it is important for different sectors in tsociety to co-operate and improve together.

Despite the boom in the gaming industry that has brought prosperity to the city, many local SMEs are not benefiting from economic growth and are facing fierce competition

with international brands, the forum pointed out.

To be the World Centre of Tourism and Leisure, the DSE Deputy Director said Macau has to face outward.

He highlighted the importance for the MSAR to ensure the quality of services provided, and for different public departments such as the Labour Affairs Bureau to provide courses for interested parties to improve their skills and competitiveness.

According to the official, DSE has provided financial aid under the SME Aid Scheme to 8,600 applicants since the scheme’s implementation in 2003, with the involved amount reaching MOP2.39 billion (US$298.21 million).

The official also stated that the government has created a platform for SMEs to adjust their business operation. The new mobile app and website – ‘Have Fun in Macau’ – which launched last January, provides information about local SMEs with the objective of helping promote local businesses. C.U.

Business Daily Friday, April 28 2017 3

Macau

Report

Here to help The EU aims to strengthen ties with the MSAR, acting as a sounding board to help improve the city’s diversification attempts and advance EU companies operating in the city, it says Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

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he European Union aims to ‘contribute to Macau’s economic diversification and long-term competitiveness,’ strengthening exchanges between European businesses and local authorities through ‘regular dialogue’ according to the ‘Joint Report to the European Parliament and the Council’ relating to 2016.

The report makes a number of suggestions for the MSAR’s development, in particular relating to its economic diversification.

Regarding the employment and labour situation in the MSAR, the report notes that despite having low employment, the city suffers from ‘an acute labour shortage’, noting that despite the need: ‘imported labour has become a sensitive issue, and there is no political consensus on how to address it.’

This in an economy that the report notes ‘relies heavily on foreign workers and professionals,’ and in which ‘businesses have repeatedly complained about the lack of suitable professionals to handle their expanding operations.’

The group notes that in relation to labour: ‘giving qualified professionals easier access to Macau’s

labour market would help boost its competitiveness.’

Linked to the current situation of labour in the MSAR, the EU notes that it would like to act as a consultative body for the government, setting up a platform of communication via the Macau European Chamber of Commerce (MECC). This could not only serve to set up a ‘regular dialogue’ between European businesses operating in the MSAR, with the ultimate goal to ‘contribute to Macao’s economic diversification and long-term competitiveness . . . [but] . . . ‘provide Macau’s authorities with a forum to seek views on relevant policies as and when required.’

In particular, the report criticises that ‘European companies rely heavily on expatriate staff and foreign workers,’ noting that ‘obtaining work permits for them has proven difficult,’ a recurring comment from both foreign company operators and locally-managed enterprises.

Economy and politics

Although the ‘market-based economy continued to function efficiently’ despite suffering a down turn in gaming revenues in the first half of last year, the report points out that the MSAR is ‘over-reliant’ upon the gaming industry.

In line with both the hiring environment and the economic

diversification the report points out that within the government’s forward-looking view, set up through its Five-Year Plan: ‘a key priority is improving the lives of ordinary people, who face mounting living and housing costs.’

Despite the challenges faced by those living in the territory, the report points out that ‘EU-Macau relations continued to flourish, with a growing portfolio of co-operation activities and solid trade relations,’ although noting that the ‘sharp contraction in Macau’s economy’ meant that ‘EU-Macau trade shrunk in 2016’.

In particular, it outlines that ‘EU exports to Macau dropped by 20.2 per cent to 603 million euros (MOP5.27 billion) while imports from Macau declined by 6.5 per cent to 86 million euros,’ pointing out that the EU ‘has been recording trade surpluses with Macau since 2009’. The changes in the MSAR economy had an ‘impact on the EU’s trade and investment interests and on the profits of European companies.’

The group hopes that ‘EU businesses could play an important role by providing expertise and services in the many ongoing infrastructure projects and expansion plans of private investors,’ with the infrastructure area in particular being one of the focuses mentioned in the report, given the Greater Bay Area initiative as well as the ‘One Belt, One Road’ programme.

Regarding taxation, with the recent ranking by Deloitte placing the MSAR’s tax system as one of the more flexible within the Asia Pacific region, the report notes that the EU ‘encouraged Macau to pursue its efforts towards a fully open, transparent and non-discriminatory government procurement framework in line with

international standards.’

The group also looks to the July 2016 signing of a CEPA (close economic partnership agreement) between the two SARs, pointing out that it ‘will cover trade in goods, trade in services and investment. However, it will not cover the free movement of people across the border for education or work’, suggesting that now ‘China, Hong Kong and Macau may build upon their CEPAs to establish a new, common platform to advance further liberalisation and facilitation of trade and investment in the ‘Greater China’ region — the so-called Guangdong-Hong Kong-Macao Big Bay Area mentioned in the 13th FiveYear Plan.’

The report does make one strong criticism regarding the extradition of individuals to the Mainland authorities despite formal agreements not being in place allowing for this exchange. ‘In 2015, the United Nations Committee Against Torture highlighted in its conclusions on Macau the issue of the surrender of fugitives,’ notes the report, pointing out that ‘the Macau authorities do not seem to have satisfactorily addressed this’.

‘The EU reiterates the importance it attaches to the rule of law and respect for human rights, and the need to comply fully with international law in matters such as extradition agreements,’ reads the report, which also points out that ‘priorities for 2017 include co-operation on economic diversification, the fight against trafficking in human beings, legal affairs, regulatory matters and research and innovation.’

Business Daily contacted both the government and the Macau European Chamber of Commerce but had not yet received a reply to enquiries by the time this story went to print.

4 Business Daily Friday, April 28 2017

Macau Opinion

Pedro Cortés* Busy Bus It is interesting to realise that the Transport Bureau is considering the possibility of restricting the shuttle buses of casino operators in the city.

Their existence has, since their very inception, been a certificate of incompetence of the department in terms of traffic planning, especially in what concerns to public transportation. It is hard to understand, not only for a layman like myself, how in a 30-odd square kilometre Region we can have three bus operators. What is being measured now seems to be a sign of competence vis-à-vis the true day-today problems of Macau residents, non-residents and tourists.

There are six gaming operators. Let’s imagine that the fleet of each of them comprises one hundred buses. In the end, we are talking about six hundred more buses in Macau. They are, of course, important for snaring tourists from the borders and other places and injecting them into the hotels and casinos, which are the true fuel of our economy.

My suggestion would be along these lines: what about seating all operators around a table and telling them to create a gambling bus line, which would pass by all resort hotels and casinos?

I understand that it is a difficult achievement and that minor details of such a new bus operator could obstruct the process. But, in my view, it will make the life of everyone easier as fewer buses would clog the tiny streets of Macau.

The itinerary and hours of such operator would be negotiated, of course, to allow equality among the six concessionaires and sub-concessionaires.

As no planning existed or exists for public transportation this initiative is worth thinking about a decade and a half since the liberalisation of the gaming market.

Notably, it is only around these lines: ‘DSAT [Transport Bureau] is considering restricting the operation of casino buses’.

Nevertheless, it seems that a departure must have a departure point to achieve a better future for our city.

So, please, DSAT officials: sit all operators down and oblige them to reach an agreement to make our life easier, our city more sustainable and our air less polluted. In the end, we will all thank you for this inventiveness. And we are here for that, irrespective, most of the time, of our different points of view! *lawyer and frequent contributor to this newspaper.

Insurance

Value of new AIA business soars

T

he value of new business (VONB) of AIA Group Limited grew 55 per cent yearon-year to US$884 million (MOP7 billion) in the three months ended February 28, 2017, the company announced in a filing with the Hong Kong Stock Exchange yesterday.

According to the insurer, the value

is ‘the highest quarterly VONB result since [its] IPO in 2010.’

The company noted in the filing that its operation in China was the fastest growing business during the period. Except for the Thailand market - the new business of which ‘was lower as [they] continued to enforce validation agency contracts’ - other market segments

in Australia, Korea, the Philippines, and Vietnam, also delivered strong performances.

AIA had ‘excellent VONB growth across a number of different customers and segments’ in Hong Kong, while the Malaysian market ‘maintained its growth momentum with very strong VONB growth across both agency and partnership distribution channels.’

AIA Group is a life insurance group with a presence in 18 markets in Asia Pacific, including Macau, Hong Kong, and Taiwan.

It had a total of US$185 billion-worth of assets as of November 30, 2016. S.Z.

Trade

Sino-Luso Business Federation meets for first time The Business Federation of China and Portuguese-speaking Countries held its first planning meeting on Wednesday to discuss the structure of its organisation.

The meeting defined that the new organisation will be led by a council comprising representatives from the China Council for the Promotion of International Trade (CCPIT),

Macao Trade and Investment Promotion Institute (IPIM), and similar departments in seven Lusophone countries.

In order to prepare for the future development of the Federation in the MSAR, a committee of 10 local commerce chambers was set up, with IPIM steering the procedures.

The first meeting only discussed

the definition of the statutes for the Macau side of the Federation whilst a meeting with CCPIT and Portuguese-speaking countries representatives will take place during a business co-operation event to be held between June 16 and 18 in Cape Verde.

Organisation members will comprise trade chambers, companies and individuals.

The Federation was one of the initiatives announced by Chinese Premier Li Keqiang during the 5th Ministerial Conference of the Forum for Economic and Trade Co-operation between China and Portuguese-speaking Countries (Forum Macao) last year.

Other measures announced by the Chinese official included the relocation of the headquarters of the China-Portuguese-speaking Countries Co-operation and Development Fund from Beijing to Macau, which is expected to take place within this year.

Traditional Medicine

Promoting Chinese medicine in Thailand Promoting the MSAR as a major centre for international co-operation in traditional medicine research was one of the themes of the Traditional Medicine Development Forum held in Bangkok, Thailand in the past two days.

With the Traditional Chinese Medicine Science and Technology Industrial Park of Co-operation between Guangdong and Macao as one of the organisers, the Forum attracted some

200 traditional medicine professionals - from government official to medical experts - from Mainland China and Southeast Asia, according to a press release of the Park.

The Forum also gathered representatives from health ministries from country members of the Association of Southeast Asian Nations (ASEAN) to discuss inter-regional co-operation in traditional medicine development.

A MSAR Government-backed project being developed in Hengqin, the Park is expected to be operational in the first half of this year. Currently, 10 investment projects from the MSAR have already signed land-leasing contracts with the Park.

The first phase of the establishment has already attracted RMB2.3 billion-worth (US$345.2 million/ MOP2.7 billion) of investment. The project includes a testing centre, a research centre, and a genetically modified pilot plant. N.M.

Business Daily Friday, April 28 2017 5

Macau Employment

Jobless rate remains at 2 pct as of end-March Local residents enjoyed an increase of MOP1,000 in their median monthly earnings during the first quarter of the year Kam Leong kamleong@macaubusinessdaily.com

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he city’s unemployment rate hovered at 2 per cent in the first quarter of the year, while median monthly earnings of local residents saw a quarter-to-quarter increase of MOP1,000 in the same period, amounting to MOP19,000. (US$2,375) According to the latest official data released yesterday by the Statistics and Census Service (DSEC) median monthly employment earnings of the city’s employed – including non-resident workers – remained unchanged at MOP15,000 in the first quarter as compared to the last quarter of 2016.

In particular, those engaging in gaming & junket activities saw their median earnings higher than the average, hitting MOP20,000 per month.

During the same period, the total labour force of the MSAR reached 387,500, a slight increase of 0.1 per cent from the period spanning December 2016 and February 2017. Of the total, the employed accounted for some 379,500, of which 278,100 were local residents, up by 400 and 1,000 period-to-period.

Meanwhile, the number of unemployed was 7,900, of whom those searching for their first job accounted

for 9.7 per cent, an increase of 1.3 percentage points period-to-period.

In the three months, the unemployment rate of local residents was 2.8 per cent, the underemployment rate was 0.5 per cent, and the labour force participation rate stood at 71 per cent.

Median monthly earnings of workers engaging in gaming & junket activities hit MOP20,000 in the first quarter

Ng Lap Seng case

Judge disallows Ng’s post-arrest statements Nelson Moura nelson.moura@macaubusinessdaily.com

U.S. prosecutors have been banned from using post-arrest statements made by local businessman Ng Lap Seng to the U.S. Federal Bureau of Investigation (FBI) for the trial of his alleged bribery, news agency Associated Press reported.

Mr. Ng’s lawyers argued on Wednesday that the businessman should not have been questioned by federal authorities after he had requested a lawyer following his arrest. The presiding judge considered the questioning as ‘improper’ and removed information of the questioning from the accusations.

According to the transcripts of the questionings, Mr. Ng said his main reason for travelling to the United Nations (UN) was to promote the development of a conference centre for the world organisation in Macau, and that he intended to build the largest exhibition centre in the world.

The businessman was charged in 2015 with bribing John Ashe, a former ambassador of Antigua and Barbuda to the United Nations General Assembly, with over US$500,000 (MOP4 million) to support a UN-backed

By industry, the amount of labour force engaged in gaming & junket activities decreased by 1.5 per cent period-to-period to some 80,100 as at the end of March. In addition, those working in the filed of restaurants & similar activities fell by 7.5 per cent period-to-period to 22,900.

Nevertheless, hotels & similar activities saw employment increase by 1.5 per cent period-to-period to 30,900 whilst wholesale & retail trade and construction recorded increases

in their labour force, up 0.2 per cent and 0.6 per cent period-to-period, amounting to 47,400 and 35,200, respectively.

According to DSEC, 24.2 per cent of the city’s total employment was engaged in recreational, cultural, gaming & other services, followed by those serving hotels, restaurants & similar activities, amounting to 14.2 per cent of the total.

Whilst some 12.5 per cent and 9.3 per cent of the employed were working in the wholesale & retail trade and construction, respectively, other major industries for the local labour force were real estate, public administration & social security, and domestic work, with employment accounting for some 7 per cent to 8 per cent of the total.

conference centre in the MSAR, to be developed by Mr. Ng’s company, Sun Kian Ip Group.

One of the main arguments of the defence has been that the arrest of Ng by U.S. authorities was politically motivated, as the country was seeking to ‘slow the progress of Chinese influence over developing nations’ by blocking the construction of a convention centre that would serve ‘southern hemisphere nations.’

During the court session on April 26, the presiding judge refused Mr. Ng’s requests to remove the formal accusations against him, while demanding the businessman identify his accomplices and any alleged bribe payment until two weeks before a trial session on May 30.

Mr. Ng’s lawyers have also requested prohibiting the prosecution from referring to their client as ‘Boss Wu’ claiming the name implied to jurors that the businessman was part of a criminal organisation.

However, the presiding iudge has allowed the prosecution to continue using the term as long as an explanation is provided to the jurors that in Chinese culture ‘Boss’ is ‘a reference to a supervisor or someone with superior status entitled to deference.’

6 Business Daily Friday, April 28 2017

Macau Trade

Luxury market imports return to MSAR in March Imports to the territory expanded during the month, propelled by increases in both gold jewellery and watches, which saw year-on-year increases of 47.1 per cent and 64.8 per cent, respectively Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

M

erchandise imports to the territory saw a 19 per cent year-on-year increase in March, according to the most recent data from the Statistics and Census Service (DSEC). The value of goods imported into the MSAR reached MOP6.41 billion during the month, while imports during the first quarter of the year amounted to MOP17.99 billion, a 6.5 per cent increase.

The territory continued to run a trade deficit, which in the third month of the year reached MOP5.35 billion, as exports from the MSAR amounted to MOP1.06 billion in March and MOP2.94 billion in the first quarter, an increase of 4.8 per cent and 8.8 per cent year-on-year, respectively.

Re-exports from the territory amounted to MOP911.9 million

during the month, a 5.2 per cent increase year-on-year, driven mostly by a surge of 341.4 per cent yearon-year, reaching MOP51 million, according to the data.

Imports to the territory expanded during the month, pushed by increases in both gold jewellery and watches, which saw year-on-year increases of 47.1 per cent and 64.8 per cent, respectively, in the month. For the first quarter of the year, both categories recorded increases, amounting to 25.9 per cent and 43.5 per cent, respectively, according to the data.

Imports to the MSAR during the month of March arrived mainly from the Hong Kong market, with 79 per cent of imported merchandise coming from the HKSAR, at MOP5.06 billion, undergoing a 20.9 per cent year-on-year increase. For the first quarter merchandise imported from the neighbouring SAR amounted to MOP14.66 billion, an increase of 7.36

per cent year-on-year.

A further indication that luxury sales are returning to the MSAR, the value of imports of handbags and wallets underwent a 14.9 per cent year-on-year increase during the month, reaching MOP266.7 billion.

Imports from outside the region - including Spain, Canada and Australia - all saw triple-digit (or more) increases year-on-year, with the value of imports from Spain in March increasing 1,100 per cent year-on-year, while those from Canada rose 431.8 per cent and those from Australia rose 216.8 per cent year-on-year, reaching MOP10.9 million, MOP11.7 million and MOP33.9 million, respectively.

The value of imports from Portugal

fell both in March and in the first quarter, at 7.9 per cent and 15.26 per cent, respectively.

Exports to the pan-Pearl River Delta saw a 2.8 per cent year-onyear fall in March, according to the data, reaching MOP381 million.

Exports to Shanghai, however, grew by 42.5 per cent, reaching MOP15 million.

Exports in the month of March made up 37.6 per cent of total exports this year, reaching MOP1.02 billion, exports to the UK saw a 776.4 per cent increase year-on-year in March and a 967.9 per cent year-on-year increase in the first quarter. Exports to Hong Kong and the Mainland saw increases of 7.2 per cent and 3.4 per cent year-on-year in March, as well as rises of 15.3 per cent and 0.4 per cent during the first semester.

The value of exports of diamonds and diamond jewellery grew 30.2 per cent, while those of machines, apparatus and parts fell by 53.3 per cent, according to the data.

on a daily basis, with more than 130,000 users and more than 20,000 suppliers registered, and over 80,000 products currently sold through the platform,’ the company claimed. “[We] want to thank shareholders for approving our name change,” said the company’s co-Chief Executive Officer, Wang Shun Yang, in the announcement, “which we believe better conveys what we are trying to accomplish as well as our strategic outlook over the long term.”

The company said recently that the acquisition is part of its attempt to diversify its business into non-gaming sectors.

Its website read yesterday that it is still running one VIP room in the City of Dreams of Melco Crown Entertainment Ltd.

The operator ran four other VIP rooms located in Sands Cotai Central, Galaxy Macau complex, StarWorld and L’Arc Macau until last year, claiming the closures were ‘part of its comprehensive strategic review of its VIP gaming room operations in Macau.’

Last December, Galaxy Entertainment Group requested two VIP promoters linked to Iao Kun Sang Lung Gaming Promotion Ltd. and Sang Heng Gaming Promotion Company Limited - to repay lines of credit amounting to HK$312 million (US$38.8 million), according to a company announcement.

The city’s Court of First Instance declared last month the bankruptcy of Sang Lung as requested by a subsidiary of the gaming corporation.

Junkets

Iao Kun now LiNiu Technology The company is shifting its business scope to technology from VIP gaming Kam Leong kamleong@macaubusinessdaily.com

Local junket Iao Kun Group Holding Company Ltd. has announced its name change to LiNiu Technology Group, effective yesterday, as the company attempts to shift its business focus from the VIP gaming business.

According to an announcement by the company on Wednesday, its ticker symbol on the NASDAQ Stock Market has been changed to ‘LINU’

from ‘IKGH.’ In March, the company said it had completed the acquisition of 51 per cent of software technology development group Guangzhou LiNiu Network Technology Co. Ltd. – which was developing an electronic trading platform for the Chinese agriculture industry.

In Wednesday’s announcement, the company said the platform named LiNiu Network - had been launched. ‘Since its launch, the site has seen traffic of over 50,000 visitors

M&A

Opening

Emperor to pay MOP2.8 bln for London property

Victoria shares her Secret with MSAR

In a bid to further geographically diversify its property portfolio, Emperor International Limited, parent company of Emperor Hotel - located in the MSAR, is buying two companies, incorporated in Luxembourg, in order to acquire a retail space located in the West End of London, United Kingdom, according to its filing with the Hong Kong Stock Exchange.

The expansion continues the group’s purchasing of retail spaces in the country, initiated in 2015 with the purchase of two properties on Oxford Street in London. The group notes that this acquisition ‘will help the Group to solidify its presence

Emperor Int’l operates Emperor Hotel in the MSAR

in overseas markets,’ and acts as a ‘rare opportunity to acquire a quality asset.’

The asset in question is an 8-storey property named the Ampersand Building and will be destined for rental purposes, given that it encompasses ‘retail spaces, office premises and leasehold apartments with a total floor area of approximately 90,999 square feet’.

The group notes that the acquisition regards a ‘quality asset, on a whole block basis, in a prime location which is perpetually attractive to retail and office tenants’ and for a total consideration of ‘approximately £270.1 million’ (MOP2.79 billion), is not expected to surpass £285 million.

The completion of the purchase is only expected to take place in June of this year, or ‘such other time or date as the Seller and the Purchaser may agree in writing.’

‘The Group believes that the Property will provide a solid rental income stream with potential rental increment in the long-term,’ notes the filing.

The new property also faces Oxford Street. K.W.

Victoria’s Secret has expanded its lingerie shop offering into the MSAR in the second-ever China opening of a lingerie store by the company.

Previously, the brand had operated in Hong Kong, the Mainland and the MSAR, although not providing its full lingerie offerings, with its first Greater China opening happening in Shanghai earlier this year.

The shop, occupying 12,000 square feet and locations formerly shared by large brands such as Swatch and Fogo Samba, encompasses two of the company’s brands – it’s more iconic

and ‘sexy’ collections directly under the Victoria’s Secret brand, as well as its PINK brand, integrating sport and casual wear with swimwear.

Although the opening of the store was not graced by the group’s ‘Angels,’ plans are in the works for a later appearance this year by the highly paid models after subsequent openings in Asia Pacific.

Victoria’s Secret is located in The Venetian’s St Mark’s Square, on the third floor, and opened to the public after a media preview and VIP showing at 6:00pm yesterday.

Business Daily Friday, April 28 2017 7

Macau Results

LVS registers “solid growth” in Macau operations

During the conference call, LVS president and COO Robert Goldstein said the group remains positive on the Macau market given the city’s upcoming infrastructural improvements such as

the opening of the Hong Kong Zhuhai Macau Bridge and the Pac On Ferry Terminal.

“We view Macau in the most favourable way. We see a fixed amount of capacity in the gaming side, perhaps a little less so in the lodging side. We see more visitation, more penetration from Mainland China into Macau. We see the emergence of a stronger and growing Cotai,” he said. “We couldn’t be more positive in how we see the market. But we see it as based on capacity, based on our ability to grow our market share in the most important section which would be the mass tables and slot machines.”

Meanwhile, Mr. Adelson revealed in the conference call that “We have been looking at other countries in Asia for a long time…We’re certainly looking at Korea. We are looking at Vietnam,” adding the company is observing how the gaming industry in the two countries will develop, and whether they are allowing locals into casinos.

Meanwhile, for Japan, Mr. Adelson claimed he was told by “some Japanese” that “the Japanese Government may even allow us, one operator, meaning LVS, to have an interest in more than one [Integrated Resort].”

“We’ve been told that we’re in pole position in more than one location . . .

I don’t know whether or not the Japanese Government will allow a foreign company to have two IR locations.

But then again, there’s nobody out there that’s an effective competitor with us,” he claimed.

Meanwhile, parent company MGM Resorts’ diluted earnings per share tripled to US$0.36 in the quarter, compared to US$0.12 a year ago. The growth is due to the group’s domestic resorts in the U.S., whose net revenues rose by 29 per cent year-on-year

to US$2.1 billion whilst operating income surged 31 per cent year-onyear to US$477 million.

In addition, adjusted property EBITDA of the domestic resorts soared 34 per cent year-on-year to US$648 million.

“MGM Resorts had a strong start to the year, as evidenced by our first quarter diluted earnings per share which tripled last year’s results, double digit same-store Adjusted Property EBITDA growth at our domestic resorts, record results at CityCenter and solid performance at MGM China,” said chairman & CEO of MGM Resorts Jim Murren.

“We continue to work toward expanding our footprint in Macau with the opening of MGM Cotai later this year,” he added. K.L.

The group attributes growth in the MSAR business to The Parisian Macao Kam Leong Kamleong@macaubusinessdaily.com

L

as Vegas Sands Corp. saw its net income surge by 41.3 per cent year-on-year to US$578 million (MOP4.62 billion) for the first quarter of the year, as the group’s business in the MSAR registered ‘solid growth.’

According to the company’s first quarter results, the group’s total net revenue increased 14.3 per cent yearon-year to US$3.11 billion whilst consolidated adjusted property EBITDA rose 24.9 per cent to US$1.15 billion from one year ago.

“During the quarter, we again generated strong cash flow across all of our operations, with solid growth in both Macau and Las Vegas . . . After a challenging period, the Macau market is growing again and its growth rate has been accelerating for three consecutive quarters,” said group Chairman and CEO Sheldon Adelson in a conference call.

In Macau, Sands China Ltd. posted an increase of 11.9 per cent in net income on a U.S. GAPP basis, totalling US$349 million. Total net revenue of the local arm also jumped 15.3 per cent year-on-year to US$1.88 billion whilst adjusted Property EBITDA increased 20.5 per cent to US$624 million.

According to Mr. Adelson, the growth in Macau operations was driven by a notable increase in mass gaming revenue. “We experienced broad-based gaming growth across both premium mass and mass segments,” he said.

He claimed the group’s mass gaming table revenue in Macau registered a growth of 18 per cent in the quarter, up from growth of 16 per cent in the fourth quarter of 2016, adding the growth in revenue was attributable to The Parisian Macao.

For the period, the group’s latest casino-resort in Cotai that opened last September raked in US$51 million in adjusted property EBITDA, and US$318 million in revenue, of which some US$279 million derived from the gaming sector.

Meanwhile, The Venetian Macao saw its revenue slightly decrease by 1.1 per cent year-on-year to US$741

million from US$749 million one year ago although its adjusted property EBITDA reached US$289, an increase of 7.8 per cent year-on-year.

For non-gaming, Mr. Adelson claimed the group’s total occupied room nights in the MSAR increased 13 per cent compared to the first quarter of 2016.

“It’s important to note that 8,000 new hotel rooms in Cotai have now been successfully absorbed in the Macao market over the last two years,” he said. “Despite the new competition on Cotai, we’ve retained our scale and critical mass advantages during peak periods.”

Positive

Results

MGM China’s earnings up in Q1 The corporation saw its mass gaming revenue jump 17 per cent year-on-year Net revenues of MGM China Ltd. went up by 7.1 per cent year-on-year in the first quarter to US$502 million (MOP4.02 billion), while adjusted EBITDA surged 25 per cent year-onyear to US$143 million, according to the quarterly results released yesterday by its parent company MGM Resorts International.

During the three months, the local gaming operator claimed its revenue derived from mass floor table games jumped by 17 per cent year-on-year,

adding the growth is attributable to an increase in hold percentage to 22.2 per cent, up 4.2 percentage points from a year ago.

Nevertheless, the company’s revenue from VIP table games fell 5 per cent year-on-year as turnover decreased by 16 per cent in the period, it said.

The group’s operating income from the MSAR market was US$73 million, soaring 55.3 per cent from US$47 million one year ago.

Corporate

Wynn holds graduation ceremony for Leadership Acceleration Programme

Wynn Macau held a graduation ceremony for the first batch of employees who had joined the Leadership Acceleration Programme. The programme, launched in 2016, seeks to facilitate the upward mobility of the local workforce. The 6-month training course for Pit Managers endowed participants with deeper management expertise, helping prepare them for more senior leadership roles in gaming.

Speaking at the graduation ceremony, Ciarán Carruthers, Chief Operating Officer of Wynn Macau, said that it was not easy for ten graduates to stand out from all candidates and complete the intensive 6-month training course. Their success has proved that Wynn’s team members constantly strive to improve and advance their learning and skills. The Leadership Acceleration Programme will continue with a second intake of participants soon, and the programme will expand its scope to cover non-gaming employees.

8 Business Daily Friday, April 28 2017

Consigliere

DON’T DARE TO LEAVE THE CITY THIS WEEKEND

S

TARTING this week, the city is full of events that you’ll surely want to join. Pay attention to this short review and indulge your cultural inclinations. We summarise the key points of each event according to the ICM website - just can scan the QR codes for further information

1. “HUSH!! Full Music”

3- 28th Macao Arts Festival opens on Friday

The pop-music event will be held from 30 April to 1 May (Sunday and Monday) at Hac Sa Beach. “A total of 25 groups of singers and bands from Macau and other Asian regions are invited to showcase different types of music. Admission is free.”

“The concert runs from 1 pm to 8 pm on 30 April and from 1 pm to 9 pm on 1 May, and features foreign musicians and bands, including Hanjin Tan, Ellen Loo, Supper Moment, KINOCO HOTEL, Hello Nico, Mary See the Future, Streetguns, Wild Children, Luktomo, Break the Rules; as well as local singers and bands, including Jun Kung, Forget the G, WhyOceans, Wat De Funk, Scamper, Crossline, Achun, Bombeiros, Catalyser, De-Aqua, Frontline Caste, Hou + Summer, Sonia Ka Ian Lao + VJ Miguel, 80 & Tal and Zenith.

“The event also features a market selling local cultural and creative products, light beverages and food, enhancing the festive experience of the audience.

“This year, the event will also feature the music video contest ‘HUSH!!

300 Seconds’ for the first time, which will allow everyone to show the diverse possibilities of music by sharing their works with the public.

The Arts Festival (MAF) is here once again. Organised by the Cultural Affairs Bureau, kicks off today, 28 April, with an opening ceremony to be held at 7:40pm in the lobby of the Macau Cultural Centre, open to the general public. “This edition of the MAF presents 25 shows and exhibitions as well as an outreach programme, in a total of over 100 activities, leading the audience to explore various possibilities of spaces by means of different art manifestations, according to ICM information.

“This edition of the MAF, featuring “Heterotopia” as theme, establishes, through texts, stories, images, music and imagery, a diversified space away from reality yet closely connected to it, bringing new possibilities to existence. The opening show Play and Play: An Evening of Movement and Music on 28 April features a reinterpretation of Schubert and Ravel’s classics by internationally acclaimed North-American modern dance company Bill T. Jones / Arnie Zane; the same company also presents the hypnotizing performance A Letter to My Nephew on 1 May. From 28 to 30 April, four sessions of the soundscape theatre play Back to the Catastrophic Typhoon of 1874, which original novel was awarded at the Macau Literature Competition, recreate daily life sounds in a real life space allowing the audience to explore their own imaginative spaces. On 3 May, the concert The Soul of Macao by the Macau Chinese Orchestra, leads the audience on a journey between Macao and Beijing opera...”

2- The Mobile Museum - Red Market x Drunken Dragon Festival

4 - “Tap Siac Craft Market” opens on Friday

On Wednesday May 3rd, at the Red Market and surrounding streets, and from 11am to 5pm, pedestrians will be able to witness the Drunken Dragon Festival.

ICM website informs that “the ‘Feast of the Drunken Dragon’ is a unique traditional folk festivity and was inscribed in the Macau Intangible Cultural Heritage List in 2009 and in the National Intangible Cultural Heritage List in 2011, respectively. In turn, the Red Market is inscribed in the Macau Cultural Heritage List as a building with architectural value. In this edition of the Macau International Museum Day Carnival, several of Macau’s museums, in collaboration with the Macao Fishmongers Association (Ou Mun Sin U Hong Chong Wui), combine the traditions of the Drunken Dragon Dance and the “Dragon Boat rice” distribution with the activities of the International Museum Day Carnival. On the one hand, traditional ceremonies will be held by the Macau Fishmongers Association, such as offerings to the gods, drunken dragon and lion dance performances, parades through the streets of Macao and distribution of ‘Dragon Boat rice’; on the other hand, the Red Market will be transformed into ‘The Mobile Museum’ by Macau’s museums, featuring an array of activities, including an exhibition about Dragon Boat rice cuisine and the history of Macao’s street vendors with the models of street hawkers’ stalls displayed on-site; as well as a series of thematic workshops including a pearler beads workshop; a cyanotype workshop - creative postcard; a workshop of painting dragon boat collages; a workshop of fan painting about the Drunken Dragon Dance; The Drunken Dragon Dance - Lego building and hand painting parent-child workshop; and Red Market - Drunken Dragon Dance key ring engraving. Furthermore, guided tours dedicated to ‘The History and Evolution of the Red Market’, three lectures about Dragon Boat Rice, the Red Market and street vendors and the community to be held successively at the Lung Wah Tea House, as well as the printing of commemorative T-shirts and wine tasting, among other activities will be available.”

Organised by the Cultural Affairs Bureau (IC) and co-organised by the Civic and Municipal Affairs Bureau, the “Tap Siac Craft Market” started last weekend and will be in the square until 30 April. The market features “a variety of cultural and creative products from the local community and seven neighbouring areas. In addition, nearly 40 workshops and several music performances and the 2nd Award Ceremony and Concert of the Subsidy Programme for the Production of Original Song Albums will be held.”

The “Tap Siac Craft Market” is opened from 5pm to 10pm, and the opening ceremony will be held on Friday, 21 April, at 6pm.

“In addition to the participation of local cultural and creative entities, cultural and creative practitioners from Mainland China, Hong Kong, Taiwan, Malaysia, Singapore and Korea have also been invited in the “Tap Siac Craft Market” over the years. In the meantime, over 40 percent of booths are from Macau in each edition.

“This year’s Tap Siac Craft Market features 172 booths from Macau, 60 booths from Mainland China, 80 booths from Hong Kong, 40 booths from Taiwan, 24 booths from Malaysia, 16 booths from Singapore, and 8 booths from Korea. The Craft Market features thousands of distinctive and creative products, including accessories, fashion design, clothing, drawings, paintings, carvings, leather products, home furnishings, creative potted plants, natural handmade products, eco-friendly products, as well as creative food and beverages; of which a few emerging brands with unique styles will also be showcased. Furthermore, nearly 40 workshops, will be held for the public to experience the fun of creativity. The Craft Market features a “Craft Market Concert” presenting local and foreign original music, enhancing the festive atmosphere.”

Business Daily Friday, April 28 2017 9

Consigliere

OR FLY AWAY

TO THE BEST UNDISCOVERED BEACHES IN THE WORLD

I

Nikki Ekstein

f you want to go to a beach to get away from other humans, you’ll have to try a lot harder than visiting popular, luxurious, seaside spots. At the six under-the-radar destinations listed below, you won’t know a soul anywhere in a hundred-mile radius—and the locals will make you feel like one of their own. Not just that: These untrammelled landscapes are postcard-perfect, free of photo-bombing tourists and full of secret coves just waiting for you to discover them. As icing on the cake, they’re all within close proximity to places you already know and love.

Time’s ticking though. These spots won’t stay secret much longer.

You’ve done Mykonos … Now try Zakynthos

You’ve done Saint Barth … Now try Sint Eustatius

Tired of looking at Mykonos’s beautiful windmills? Never. But maybe you’re ready to swap out the thumping social scene for something more laid-back. Head to the Ionian island of Zakynthos, a little-explored paradise where secret, pearlescent coves are hidden from plain sight by towering limestone bluffs.

The western and northern sides of the island are the quietest and most beautiful—and the latter is where you’ll find the stone-walled Porto Zante Villas and Spa, which Greece expert Mina Agnos, president of Travelive, says offers an unsurpassed experience. “Each villa has panoramic views, a private, heated swimming pool, and access to a private section of beach,” she said. Other island draws: the neon-blue Shipwreck Beach (named for a destroyed vessel that still sits on the sand), endangered Caretta Caretta (loggerhead) sea turtles, and plenty of yacht charters for a day of Ionian beach-hopping.

Not every place that Christopher Columbus discovered was put on the global map. Case in point: Sint Eustatius, one of the most under-the-radar islands in the resort-rich Caribbean, which the famed explorer first documented in 1493. Little has been said about it since then. Its sole city, Oranjestad, is known as the “smallest capital in the world,” and the entire island has a population of just 3,183.

But Statia, as it’s known, is just a short puddle-hopper flight from Sint Maarten, and scuba diving expert Robert Becker, of ProTravel, considers it one of his all-time favourite places. “There’s no mega-tourism, and most people don’t even know it’s there,” he said. “It’s got great hiking and lots of gorgeous tropical foliage, plus very welcoming people who have a genuine desire to know that you’re enjoying your stay.” Bunk up at the Dutch colonial-style Old Gin House, where Becker says you’ll feel like you’re staying with family friends, and pack goggles: The island is ringed by a national marine park, with impeccably-protected coral reefs and tropical fish stocks.

You’ve done Punta del Este, Uruguay … Now try Mancora, Peru

You’ve done the Maldives … Now try India’s Andamans

“This beach is popular with locals, but few Western visitors have discovered it,” said Ashish Sanghrajka, Latin America enthusiast and president of Big Five Tours.

That’s because most travelers to Peru head inland to the Sacred Valley, rather than up the coast. That’s a big mistake.

Not only does Sanghrajka say that the beach town of Mancora—close to the border of Ecuador and a four-hour flight from Lima—has “some of the best banana board surfing in Latin America.” It’s also home to a stunning nine-room resort, Kichic. Nearby, at Túcume, you can still accomplish some of that requisite Peruvian ruin-spotting; the adobe complex is nearly a thousand years old. And soon enough, the country’s luxury resort standard setter, Inkaterra, will open a beach retreat in the vicinity—in a fishing town that inspired Ernest Hemingway’s The Old Man and the Sea.

You’ll see nobody else on the beaches of India’s Andaman Islands, said Black Tomato co-founder Tom Marchant, except for the occasional elephant.

That should be selling point enough. (Who doesn’t love elephants?) But the Andamans have even more going for them: Some of the world’s best scuba diving, easy access via suddenly trendy Calcutta, and its first-ever five-star stay, Jalakara. “Now is the time to see these pristine islands before more people get wind of them,” Marchant told Bloomberg. “They’re a haven of natural beauty, a contrast to the bustling mainland and a relaxed alternative to the Maldives and Mauritius.”

You’ve done Ibiza … Now try Coastal Portugal

You’ve done Zanzibar … Now try Likoma Island, Malawi

Portugal’s tourism mojo has skyrocketed in the last year, luring many to its romantic cities and dreamy wine valleys, but its rugged beaches have yet to experience the boom. According to Virginia Irurita, who specializes in custom trips to the Iberian peninsula, there “are no unexplored beaches left in Spain,” but several spots along the Portuguese coast are still “wild, beautiful, and empty.” Take Odeceixe (pronounced udd-sesh): It’s set at the juncture of the Atlantic Ocean and the tightly-coiled Ceixe River, which separates the Algarve from Alentejo.

There, you’ll find pristine beaches between the river’s curled banks as well as on the quartz-lined ocean coast—so many of them that you can kayak from one to the next, looking for resident otters or places to avoid human contact. The crowds are thin, in part because there are no luxury hotels.

One exception: Herdade do Touril, an affordable boutique bolthole with direct beach access. It’s far more stylish and hospitable than its 100 euro per-night price point would let on.

Alex Malcolm, founder and managing director of Jacada Travel, says offthe-beaten-path Likoma Island on Lake Malawi “should be considered a ‘world’s-best beach,’” both for its “current-free, crystal-clear waters” and its vibrant cultural draws: The island is dotted with fishing villages along its shorelines.

Stay at Kaya Mawa Resort, he told us, where “each room was individually designed in partnership with a local workshop set up to empower single mothers, and the whole staff comes from neighbouring villages,” for a mix of social consciousness, authenticity, and intimacy. How to get there? Fly to Johannesburg first, then onto Lilongwe, Malawi, where a light aircraft can take you to Likoma Island. It’s a hike—but worth the commitment. Bloomberg News

10 Business Daily Friday, April 28 2017

Greater China Official data

Industrial profits soar on building boom but pace slowing Shares of material companies have recoiled from their highest level since the 2015 market crash

P

rofits earned by China’s industrial firms rose 23.8 per cent in March from a year earlier, buoyed by a continued construction boom, though the pace of growth eased from multi-year highs seen in previous months.

Profits in March rose to RMB688.7 billion (US$99.9 billion), the National Bureau of Statistics (NBS) said on its website yesterday.

steel mills and smelters and giving them stronger cash flow to reduce a mountain of debt.

But firms further down the supply chain are seeing pressure on profit margins as they struggle to pass on higher input costs to consumers amid stiff competition.

“Purchasing prices are rising too quickly which is increasing pressure

on companies that are trying to cut raw material costs,” NBS official He Ping said in a statement accompanying the data, adding that financial costs for businesses are also rising.

Indeed, profits of equipment manufacturers rose 6 per centage points from the pace in Jan-Feb, while profits for makers of consumer products were up just 0.5 per centage points.

Profits for miners and producers of other raw materials fell 0.9 and 9.5 per centage points, respectively, likely reflecting a recent tumble in

Key Points March industrial profits up 23.8 pct y/y, Q1 up 28.3 pct Construction boom spurs prices of building materials But rate of growth is slowing as commodities prices recoil

China’s highly speculative commodities futures markets.

Shares of material companies have recoiled from their highest level since the 2015 market crash, while infrastructure stocks have pulled back from multi-month highs, though both are still up solidly so far this year.

All 13 steel companies that published first-quarter results as of April 19 reported net profits had more than doubled, the China Securities Journal said last week, with Nanjing Iron and Steel posting a surge of 4,830 per cent.

Fatter profits for steel mills could make Beijing’s job tougher as it tries to reduce industrial overcapacity by closing more inefficient and heavily polluting plants.

China’s largest oil and gas producer, PetroChina, said earlier this month that it expected a first-quarter profit of RMB5-6 billion, down slightly from the preceding quarter, but a turnaround from a huge loss a year earlier.

Cooling growth

Many analysts, however, believe producer price inflation in China is peaking, which could temper profitability later this year and rob the world’s second-largest economy of some momentum.

Industrial firms’ liabilities rose 6.6 per cent from a year earlier as of endMarch, unchanged from the pace seen in the first two months of 2017.

The profit data covers large enterprises with annual revenues of more than RMB20 million from their main operations. Reuters

In the first quarter, industrial profits climbed 28.3 per cent to RMB1.7 trillion, slowing from growth of 31.5 per cent in the first two months but still robust enough to suggest a further recovery in fixed asset investment in China in coming months.

Higher government infrastructure spending and a frenzied housing market have helped spur sales and prices of building materials, reviving profits for the country’s long-ailing “smokestack” industries such as

Wealth management

Mainland banks, brokers eye robo advice for edge on competition Given low-interest rates in China and expensive real estate, Chinese investors are seeking alternative ways to generate returns Elzio Barreto

China’s wealth management industry is preparing for a boom in automated investment advice and trading programs, or “robo-advisors”, as brokerages, banks and insurers look for a cheaper way to increase revenue from retail clients.

Robo advice services barely existed in China before 2015, but they are expected to manage US$27.1 billion of assets at the end of 2017, though that remains small relative to the US$182 billion figure for the United States, where services launched several years earlier, according to market research firm Statista.

But the market in China is forecast to more than double every year from 2017 to 2021, compared with U.S. growth of 29 percent a year, which will rapidly narrow the gap, Statista figures show.

The number of Chinese investors using robo services is forecast to soar to 79.4 million over that period from fewer than 2 million last year.

“Everyone talks about the billionaires, but actually we’re talking about hundreds of millions of customers in that income band who are basically starting to have investable assets that they want to reposition and redeploy,” said Matthew Phillips, financial services leader for PwC China and Hong Kong.

“The only way to service those customers is to automate those processes.”

Competition from large financial technology (Fintech) companies, including Alibaba Group affiliate Ant

Financial, Ping An-backed Lufax, and start-ups such as WaCai is pushing traditional financial companies to embrace the trend.

Some traditional players without the technical expertise to develop their own robo advisors are turning to technology firms such as Pintec Group’s Xuanji and MiCai. Others, like China Merchants Bank (CMB), the country’s largest nonstate-backed lender, have managed to create their own.

After a months-long nationwide advertising campaign, CMB launched in December its “Machine Gene Investment”, or Mojie robo advisory service, which pre-selects a range of assets and trades them automatically, cutting the costs of investment advice for users of its internet banking app.

The bank said users had invested an average RMB36,900 (US$5,360) each so far in the new service, and a person familiar with the bank’s business said

the service had racked up 3 billion yuan in assets under management in just a couple of months.

Must have

After months in development, Ant Financial, the world’s largest fintech firm, will be launching automated advice to its millions of clients this year, people familiar with the plans told Reuters. The company itself said it wouldn’t be offering them “in the short-term”.

The sources also said Industrial and Commercial Bank of China (ICBC) is about to introduce a similar tool.

ICBC, the world’s largest bank by assets, declined to comment.

Moves by the two behemoths could tempt others off the fence about robo services.

“When you have a main-street bank that did a huge marketing campaign in that particular field ... that solution becomes a must-have for the industry, and the bigger state-owned banks follow them,” said Gregory Van den Bergh, chief executive of MiCai, China’s oldest robo advisor. “It’s had a very good effect on the industry.”

Xuanji signed early in 2017 to have

its technology run Minsheng Securities’ robo advisor and expects to soon close other deals with an insurer and a bank in China, CEO Zheng Yudong said. MiCai is getting many inquiries from banks in mainland China, though the company can’t disclose the names of clients, Van den Bergh added.

An EY survey of wealth management clients and industry executives showed Chinese respondents, who are already used to handling most of their finances on mobile phones, were the most likely in Asia Pacific to open robo advisory accounts.

Key Points Financial firms looking to automated advice to cut costs China robo advice assets forecast at $27.1 bln end-2017 Market expected to double every year to 2021 Ant Financial, ICBC to offer robo advice this year -sources As many as 76 percent said they would consider it, compared with just 25 percent in Australia.

Given low-interest rates in China and expensive real estate, Chinese investors are seeking alternative ways to generate returns, while avoiding the volatility that followed a major slump in Shanghai and Shenzhen stock markets in 2015.

Many hope that a robo-tailored portfolio can deliver.

“Robo advisory is not for gamblers.

It’s not a sexy product. It’s supposed to prevent volatility; it focuses on stability, so lower returns, but no spikes up and down,” Xuanji’s Zheng said. Reuters

Business Daily Friday, April 28 2017 11

Greater China In Brief FX regulator

Services trade deficit widens China’s trade deficit in services widened to US$22.1 billion in March from US$17.6 billion in February, the foreign exchange regulator said yesterday.

March’s deficit was largely due to a US$16.5 billion gulf in spending between foreign tourists and the Chinese, who splurge more abroad than visitors in China, data from the State Administration of Foreign Exchange showed.

Results

China Telecom says first-quarter profit rises

SFC

HK regulator to take ‘hard’ look into share pledge financing SFC head said the regulator will also continue to focus on IPO sponsor failures Michelle Price

Hong Kong’s securities regulator said yesterday it would take “a hard look” into pledging of shares for loans, such as in the case of China Huishan Dairy Holdings Co Ltd which last month saw a sudden stock plunge on concerns over its finances.

On March 24, shares of Huishan plunged 85 per cent in just a few hours, wiping US$4 billion of its market value in a single day as investors worried about its financial position.

Trading in shares of China’s largest integrated dairy firm has been halted since that day.

Huishan’s controlling shareholder Champ Harvest later said it had pledged nearly all of its shares to secure loans from Chinese banks.

“We do need a hard look at share pledges that unravel,” said Ashley Alder, chief executive of the Securities and Futures Commission (SFC), when asked about the fall in Huishan shares.

“We do need to scope out the extent to which there are problems that shareholders need to know upfront.”

Alder did not specify what steps the regulator may take as it examines how shares are pledged for loans, but added any potential rule changes could take the form of guidelines

and not every share pledge would need to be disclosed.

The regulator will also continue to focus on IPO sponsor failures, Alder said, when asked whether the SFC planned to probe banks that worked on Huishan’s US$1.3 billion listing in 2013.

The SFC plans to crack down on overly-valued asset sales by listed companies in the city, part of a move to clean up capital market activity in Hong Kong, Alder said.

It also plans to step up scrutiny of initial public offerings and listed companies, after it recently took a closer look at IPOs in the small-cap Growth Enterprise Market (GEM) at the Hong Kong stock exchange because of massive debut price spikes during listings.

“We hope to tackle quite a longstanding and thorny problem to do with unrealistic valuations used to support often quite suspicious asset disposals by listed companies,” Alder said during a media luncheon. Reuters

Aviation

Europe pledge closer ties with Mainland ahead of landmark jet launch European Aviation Safety Agency said on Wednesday it had started the process of certification for the C919 Chinese and European aviation regulators said yesterday they will forge closer ties over aircraft manufacturing and certification as the global industry turns its eyes to China ahead of the maiden flight of the Chinese-built C919 jet.

“The ever closer ties between the Chinese and European aviation industries have created good conditions and a solid foundation to deepen cooperation on aircraft manufacturing and certification” Feng Zhenglin, Civil Aviation Administration of China administrator The Civil Aviation Administration of China (CAAC) and European Aviation Safety Agency (EASA) are holding a landmark meeting on aviation in Shanghai as China’s government pushes for a bigger role in the global aviation market.

The first flight in May of the C919 jet, built by Commercial Aircraft Corp of China (COMAC), will mark a major step for Beijing. The government hopes the jet will compete with Boeing Co and Airbus SE for a slice of global jet sales worth US$2 trillion over the next 20 years.

A big hurdle, though, is that Europe and the United States have yet to certify a domestically built Chinese passenger plane and do not currently recognise Chinese certification procedures, limiting the countries to which China can sell its planes.

“The ever closer ties between the Chinese and European aviation industries have created good conditions and a solid foundation to deepen

cooperation on aircraft manufacturing and certification,” CAAC administrator Feng Zhenglin said.

Another CAAC official said closer ties would “increase the global influence and competitiveness of Chinese aviation”.

The meeting between CAAC and EASA is the first since the two signed an agreement in 2015 to cooperate more closely on aviation issues in a five-year project.

The ties have already yielded some results. EASA said on Wednesday it had started the process of certification for the C919, though no decision had yet been made.

China’s first domestically made plane, the regional ARJ21 jet, has yet to receive U.S. Federal Aviation Administration (FAA) or EASA certification, which had raised questions over whether the larger C919 jet would be approved in the West.

The Shanghai meeting will see a raft of global aviation firms including COMAC, Airbus, Safran SA, Rolls-Royce Holdings PLC and British Airways, part of International Consolidated Airlines Group SA. Reuters

State-owned telecommunications network operator China Telecom Corp Ltd yesterday said net profit rose 4.5 percent in the first quarter due to growth in users of its fourth-generation network (4G) and mobile service revenue. Profit reached RMB5.3 billion (UA$768.54 million) in January-March, compared with RMB5.12 billion a year earlier. Operating revenue rose 5.8 percent to RMB91.4 billion. The firm is China’s largest fixed-line service provider and the smallest among the three state-owned telcos in the mobile business. China Telecom said its mobile subscribers grew to 222 million in the quarter, including 138 million customers for its 4G mobile network.

Watchdog

Banking regulator eases bad loan rules to help lenders China’s banking regulator yesterday relaxed the rules for the transfer of non-performing loans, allowing lenders to sell soured debt in bundles of three from the previous 10, three sources with direct knowledge told Reuters.

The move is the latest by the China Banking Regulatory Commission (CBRC) to ease lenders’ struggle with a mounting pile of bad debt as borrowers struggle with the slowing economic growth.

Smaller bundles of NPLs would enable banks to offload the bad debt faster. The new rules in the CBRC notice, which was circulated to China’s banks on Wednesday, will make it easier for lenders to transfer out their bad loans, the sources said.

Results

Mainland, HK drive insurer AIA Group’s new business AIA Group Ltd, the world’s third-largest life insurer by market value, posted a 55 per cent rise in its new business in the first quarter, helped by a surge in sales in China and Hong Kong. Over the past seven years, the company has expanded rapidly into growth markets including India and China, leading to a quadrupling in the value of new business at AIA to US$2.8 billion between 2010 and November 2016, according to the company.

The insurer’s value of new business, which measures expected profits from new premiums and is a key gauge for growth, rose to US$884 million during the quarter, up from US$578 million in the same period a year ago, the company said.

12 Business Daily Friday, April 28 2017

Asia Growth

South Korea raises 2017 export outlook The trade ministry upgraded its 2017 export outlook to 6-7 per cent, exceeding the earlier 2.9 per cent estimate Cynthia Kim and Christine Kim

South Korea raised its export outlook for the year after first quarter economic growth accelerated at a sharper pace, with policymakers saying there was no need for extra stimulus even as the economy faces a host of political and economic challenges.

The firm start to the year on strong exports and capital investment is a relief for policymakers after months of political crisis and as the country prepares to elect a new president in May amid rising tensions with neighbours North Korea and China.

With overall growth rebounding, drawing up a supplementary budget to boost the economy won’t be necessary for now, Finance Minister Yoo Il-ho told reporters, although the final decision may be up to the nation’s next leader.

Growth in the second quarter won’t slow sharply, Yoo added, but uncertainties will continue to persist.

Gross domestic product grew a seasonally adjusted 0.9 per cent in the first quarter, the Bank of Korea (BOK) said earlier yesterday, accelerating from a 0.5 per cent quarterly expansion in the final three months

of last year.

It was the fastest pace since the second quarter of 2016 when the economy grew 0.9 per cent. The median forecast in a Reuters survey was for a 0.7 per cent expansion.

From a year earlier, GDP rose 2.7 per cent in the first quarter.

Investments, exports

Facility investment led overall growth with a 4.3 per cent gain on quarter, while exports gained 1.9 per cent after declining 0.1 per cent a quarter earlier. Private consumption grew 0.4 per cent, accelerating from 0.2 per cent previously.

Construction investment growth leapt 5.3 per cent from three months earlier, as “apartment projects that boomed from a year earlier are still supporting economic growth,” a

finance ministry official said.

Still, South Korea’s service sector barely averted decline and rose at the slowest pace in 32 quarters, 0.1 per cent, from three months earlier.

“Chinese tourist numbers fell due to China’s restrictions on travel to South Korea, while consumer sentiment was sluggish. Some also delayed buying their mobile phones waiting for new smartphone releases,” Chung Kyu-il, a director general at the BOK said.

Asia’s fourth-largest economy will hold a presidential election on May 9 following the impeachment of ex-leader Park Geun-hye.

Leading democratic candidate Moon Jae-in has already promised an extra budget of at least 10 trillion won (US$8.90 billion), although many analysts including Stephen Lee, chief economist at Meritz Securities, said current economic conditions don’t warrant one for now.

“Drawing up an extra budget wouldn’t make sense anymore,” Lee said. “We have to see who’ll become president, but I think it would be better to focus on spending on next year’s budget in order to improve the fundamentals of the economy.”

The trade ministry upgraded its 2017 export outlook to 6-7 per cent, exceeding the earlier 2.9 per cent estimate, citing stronger shipments of semiconductors, display panels and cosmetics.

The BOK kept interest rates unchanged at a record low of 1.25 per cent in April and most economists expect it to hold fire until next year.

“We think the BOK’s next move is up and, in line with consensus, we forecast it happening in the second half of 2018,” ING said in report ahead of the GDP data. Reuters

Monetary policy

Bank of Japan sounds most upbeat on economy in 9 years Governor Haruhiko Kuroda reminded markets the Japanese central bank is nowhere near an exit from its massive stimulus The Bank of Japan (BOJ) kept monetary policy unchanged yesterday and offered its most optimistic assessment of the economy in nine years, signalling its confidence that a pick-up in overseas demand will help sustain an export-driven recovery.

But the central bank slightly cut its inflation forecast for this fiscal year in a quarterly review of its projections, suggesting that it will maintain its massive monetary stimulus for the time being to achieve its ambitious 2 per cent target.

“The inflation and growth projections, as well as the upgrade of its economic assessment, were all in line with market forecasts, so there was no surprise at this meeting,” said Yasunari Ueno, chief market economist at Mizuho Securities.

“As long as the economy maintains its momentum, the BOJ will likely stand pat at least until next spring, when Kuroda serves out his term.”

BOJ Governor Haruhiko Kuroda reminded markets the Japanese central bank is nowhere near an exit from its massive stimulus.

“We expect inflation to accelerate toward 2 per cent but currently, inflation is around zero per cent,” Kuroda told reporters after the policy meeting.

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“Talking about a specific exit strategy now would cause undue confusion in markets,” he said. “The prerequisite for such debate to happen is for inflation to achieve 2 per cent.”

In a widely expected move, the BOJ maintained its short-term interest rate target at minus 0.1 per cent and a pledge to guide 10-year government bond yields around zero per cent.

Key Points BOJ keeps interest rate targets intact BOJ slightly cuts this fiscal yr’s price forecast

describing the state of the economy, signalling its conviction that the recovery was gaining momentum and that it sees no need for additional stimulus.

Doubts about inflation

In the quarterly review, the BOJ cut its core consumer inflation forecast for the year ending in March 2018 to 1.4 per cent from 1.5 per cent, blaming stubbornly weak services and durable goods prices.

The BOJ also complained that public perceptions of future price rises remained weak with no clear signs of a pick-up.

But it maintained its projection that inflation will reach 2 per cent during the fiscal year ending in March 2019 on the view that a tightening job market would gradually

push up wages.

Many analysts remain doubtful inflation will accelerate as quickly as the BOJ projects, with slow wage growth keeping households from boosting spending.

“Consumer price growth is around zero, which makes all of these price forecasts look overly optimistic,” said Shuji Tonouchi, senior market economist at Mitsubishi UFJ Morgan Stanley Securities.

“The BOJ upgraded its economic assessment, but this is due more to overseas demand. Japan’s labour market is tight, but retailers still want to cut prices.”

Most analysts polled by Reuters expect the BOJ’s next move to be a tightening of monetary policy, though many do not expect it to happen until next year at the earliest. Reuters

Maintains timing for hitting price goal Too early to debate exit from stimulus - Kuroda “Japan’s economy has been turning toward a moderate expansion,” the BOJ said a quarterly review of its long-term economic and price projections, compared with the previous month’s view that it was “improving moderately as a trend.”

It was the first time since March 2008 the BOJ used the word “expansion” in

Bank of Japan Governor Haruhiko Kuroda

Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Kam Leong; Nelson Moura; Kelsey Wilhelm; Matthew Potger; Cecilia U; Sheyla Zandonai Group Senior Analyst José I. Duarte Design Aivi N. Remulla Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors Albano Martins; James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@‌projectasiacorp.‌com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@‌macaubusinessdaily.‌com Subscriptions sub@‌macaubusinessdaily.‌com Online www.‌macaubusinessdaily.com

Business Daily Friday, April 28 2017 13

Asia In Brief SGX

Regulatory unit to review quarterly reporting needs

Environment

Philippines bans open-pit mining as minister toughens crackdown There are currently 14 open pits in the country, 10 of them abandoned Enrico Dela Cruz and Manolo Serapio Jr

Philippine Environment Secretary Regina Lopez said yesterday she will ban open-pit mining in the country, toughening a months-long crackdown on the sector she blames for extensive environmental damage.

The ban comes just days before the outspoken environmentalist-turned-regulator faces a confirmation hearing in Congress that could lead to her removal as minister after a storm of complaints from pro-mining groups.

Lopez, who has already ordered the closure of more than half the country’s operating mines and has previously described open pit mines as “madness”, said it was within her prerogative to ban the practice, which is allowed under Philippines mining law.

“Each open pit is a financial liability for government for life,” she told a media briefing. “It kills the economic potential of the place.”

The ban will take effect immediately but will not cover existing mines, she said.

Mining is a contentious issue in the largely underexplored Southeast

Asian country after past examples of environmental mismanagement.

Lopez in February ordered the permanent closure of 22 of 41 operating mines in the world’s top nickel ore supplier and later cancelled dozens of contracts for undeveloped mines to protect water resources.

Miners have argued her actions are illegal and no mine has yet been closed as companies pursue an appeals process that can only be settled

by President Rodrigo Duterte.

The Chamber of Mines of the Philippines described her latest move as “absurd.”

“With this open-pit ban, she is essentially banning the mining of shallow ore deposits that can only be extracted using open-pit mining,” said Chamber spokesman Ronald Recidoro.

Wants Duterte as successor

The ban would halt the US$5.9 billion Tampakan copper-gold project in South Cotabato province in Mindanao island, the nation’s biggest stalled mining venture.

Tampakan failed to take off after the province where it is located banned open-pit mining in 2010, prompting

commodities giant Glencore Plc to quit the project in 2015.

Lopez has said the project would cover an area the size of 700 football fields in what otherwise would be agricultural land.

There are currently 14 open pits in the country, 10 of them abandoned, said Lopez, who flew to several mining sites in recent weeks to inspect them.

Lawmakers will resume hearings on Lopez’s appointment on May 2 after sessions in March when pro-mining groups assailed her capacity as minister.

Key Points Open pits a financial liability for government -Lopez Says ban won’t apply to existing mines Lopez faces congressional hearing next week to confirm her role Philippines is world’s top nickel ore supplier Lopez said she was imposing the ban now because she was unsure of the outcome of the hearings.

If lawmakers reject her appointment, Lopez said she wants Duterte to succeed her.

“That’s the kind of person you really need at DENR,” she said, referring to her agency. “Brave, cannot be bought, everyone will be scared.”

Reuters

Commodities

Australia plans LNG export limits It is the world’s second-largest LNG exporter after Qatar Australia’s conservative government unveiled a radical plan yesterday to restrict exports of liquefied natural gas (LNG) at times when domestic shortages push up local prices, aiming to ease soaring energy costs for local manufacturers.

“Restricting exports is almost unprecedented for Australia” Malcolm Roberts, chief executive of the Australian Petroleum Production and Exploration Association The plan would allow Australia’s resources minister to impose controls on LNG exports on advice from the market operator and regulator, as the government seeks to cap domestic gas prices, which have become a political hot potato.

“It’s not a threat. This will be export controls. They will not be able to export gas if that has the consequence of reducing the availability of gas for the Australian market,” Prime Minister Malcolm Turnbull told Australian Broadcasting Corp radio.

Australia is the world’s second-largest LNG exporter after Qatar, but local gas prices have rocketed over the past two years with the start of LNG exports from three newly built plants in eastern Australia to customers in China, Japan, Korea and Malaysia.

The government’s move drew a swift rebuke from gas producers, who called instead for curbs on onshore gas exploration to be lifted to help boost supply.

“Restricting exports is almost unprecedented for Australia,” said Malcolm Roberts, chief executive of the Australian Petroleum Production and Exploration Association.

The Australian Energy Market Operator warned in March of a shortage

set to hit eastern Australia and has already taken steps to ensure there is enough gas for power plants at peak times.

At least one of the east coast LNG plants, Gladstone LNG (GLNG) - operated by Australia’s Santos Ltd - is drawing gas out of the domestic market to help meet its export contracts.

Santos said yesterday it was seeking more details on how the new policy would work.

“Moving forward, Santos will supply more gas into the Australian dometsic market than it purchases for its share of LNG exports,” it said in a statement to the stock exchange.

The two other eastern LNG exporters, Queensland Curtis LNG, operated

by Royal Dutch Shell, and Australia Pacific LNG, operated by ConocoPhillips, have committed to being net gas suppliers to the domestic market.

Manufacturers welcomed Turnbull’s move. Reuters

Singapore Exchange’s newly-formed regulatory subsidiary will review whether companies need to continue filing quarterly results to the exchange, as part of a strategic review of the bourse’s regulations. SGX, which has the rare dual role as market operator and front-line regulator, announced the creation of Singapore Exchange Regulation Pte Ltd (SGX RegCo) last year to address potential conflicts between its commercial objectives and regulatory responsibilities. “We intend to conduct a strategic review in due course once the whole board is appointed and running,” Tan Cheng Han, who was appointed as chairman of SGX RegCo last month, told a news conference yesterday.

Finance minister

Thai economy may grow 4 pct if private investment rises Thailand’s economy may grow 4 per cent this year if private investment increases, the finance minister said yesterday, after his ministry maintained its growth outlook at 3.6 per cent. The government wants to see the economy growing more than 3.6 per cent because that level is not its full potential yet, Apisak Tantivorawong told reporters. “That’s why we are trying to bring in more private investment,” he said. He also said the government planned to spend 30 billion baht (US$868.56 million) per fiscal year to help low-income earners.

The economy expanded 3.2 per cent last year.

Results

Maruti Suzuki’s Q4 profit up The country’s top-selling car maker, posted a 15.8 per cent rise in fourth-quarter profit yesterday, helped by increases in sales of premium models such as the Brezza SUV and Baleno hatchback. Net profit for the three months ended March 31 rose to 17.09 billion rupees (US$266.64 million) from 14.76 billion rupees in the year-ago quarter, the company said in a statement. The profit figure however slightly missed analysts’ average estimate.

Analysts had expected the company to post a profit of 17.56 billion rupees, according to Thomson Reuters data.

Forecast

Nintendo sees Switch console doubling full-year profit Japan’s Nintendo Co Ltd said yesterday it expects operating profit to jump 121 per cent in the year through March 2018, bolstered by strong demand for its new Switch console. Nintendo estimates profit to grow to 65 billion yen (US$583.85 million) from 29.4 billion yen a year prior. The outlook compared with the 103.67 billion yen average of 23 analyst estimates surveyed

by Thomson Reuters I/B/E/S. Kyoto-based Nintendo is aiming to sell 10 million Switch consoles in the current financial year, on top of 2.7 million units sold in March alone, the month of its global debut.

14 Business Daily Friday, April 28 2017

International In Brief Negotiations

Merkel warns Britons: don’t delude yourself over Brexit German Chancellor Angela Merkel told Britons yesterday not to delude themselves that they would continue to enjoy EU rights after Brexit and insisted the bloc would only agree on future ties with London after they have nailed down a deal to leave. Striking a firm tone in a speech to the Bundestag lower house of parliament before a weekend summit on Brexit, Merkel also said talks on Britain’s financial obligations to the EU would have to be addressed early on in the talks.

Travel

UK tourism set for boost from weak pound The British hotel and leisure industry is set for a bumper year as a weak pound boosts demand from foreign tourists and deters Britons from travelling abroad, a survey by Barclays showed yesterday. Nearly two-thirds of international holidaymakers surveyed by the bank said they were more interested in holidaying in the UK compared with this time last year. The top driver of this was the weaker pound, cited by 31 per cent, while greater spending power was cited by 30 per cent. The weaker pound means that Britons conversely get less bang for their buck abroad, and rising inflation is also fuelling demand from domestic holidaymakers.

Emergent economies

Brazil eyes OECD membership to woo investors after recession If approved by the OECD Council, Brazil would become the biggest emerging market member of the group Alonso Soto

B

razil could decide to join the Organisation for Economic Co-operation and Development (OECD) as soon as next month, officials told Reuters, as President Michel Temer seeks its seal of approval for reforms to Latin America’s largest economy.

Temer’s intention to join the Paris-based think tank is his latest effort to strengthen ties with Western developed nations after previous Brazilian governments prioritized relations with developing peers.

The OECD advises its 35 members of mostly rich countries and is considered a key influencer in the world’s economic architecture.

The final decision, however, hinges on a review of the entry requirements that could mean legislative changes to comply with OECD tax and transparency rules, said one official who asked for anonymity because the matter is not public.

An initial result of the review is expected for May 15.

The official and three other sources said Temer hopes the OECD’s imprimatur will attract foreign investment to an economy struggling to pull out of its worst recession ever.

“Membership will guarantee investors that Brazil is seeking market-friendly policies,” said another official, adding that the final decision will also depend on the OECD willingness to speed up membership approval.

‘SecretaryGeneral Angel Gurria has signalled the group could fast-track the accession of key partners, including Brazil, China, South Africa, India and Indonesia’ If approved by the OECD Council, Brazil would become the biggest emerging market member of the group and the third from Latin America after Mexico and Chile.

Neighbouring Colombia has been in membership talks with the OECD since 2013.

Although the membership process usually takes years, OECD Secretary-General Angel Gurria has signalled the group could fast-track the accession of key partners, including Brazil, China, South Africa, India and Indonesia.

A OECD spokesperson said decisions about the approval time frame are made by the OECD Council after a formal request is submitted.

Temer’s press office did not respond to emails seeking comments. The finance ministry declined to comment.

Temer, in office for just over a year following the impeachment of leftist President Dilma Rousseff, is pursuing unpopular austerity reforms to coax back investors.

“This is a step that seeks to have Brazil gain a seal of approval largely meant to make the country more attractive to foreign investors,” Oliver Stuenkel, professor of international relations at Sao Paulo-based think tank FGV. Still, the road for approval may not be an easy one for Brazil.

In a closed economy used to government intervention, bureaucrats have for years resisted changing tax rules as well as transparency policies to comply with OECD standards.

“Joining the OECD is not simple or easy,” said Welber Barral, Brazil’s international trade secretary from 2007 to 2011. “Changes to tax regulation and governance would face tough resistance from Brazil’s powerful bureaucracy.” Reuters

Results

PayPal offers positive outlook, beats expectations PayPal Holdings Inc raised its earnings outlook on Wednesday after reporting higher-than-expected quarterly profit resulting from an increase in payment processing volumes and user growth. The company raised its full-year profit forecast to US$1.28-US$1.33 per share from US$1.26-US$1.31, and said its board authorized a US$5 billion share buyback program. Revenue rose 17 per cent to US$2.98 billion, beating analysts’ average estimate of US$2.94 billion.

Chief Financial Officer John Rainey said the company was planning some staff cuts and other restructuring initiatives which will slash US$75 million in annual costs.

Survey

German consumer morale rebounds more than expected The mood among German consumers rebounded more than expected heading into May to reach a three-month high, a survey showed yesterday, citing confidence that Europe’s largest economy is heading in the right direction and a dip in inflation.

The consumer sentiment indicator, published by the Nuremberg-based GfK institute and based on a survey of around 2,000 Germans, rose to 10.2 going into May. A Reuters poll had expected the headline figure to rise to 9.9 from 9.8 in the previous month.

Survey

Political risk biggest concern for insurers globally Insurers expect the biggest returns in 2017 to come from private equity Political risk is the biggest concern this year for insurers globally, following several shock outcomes in 2016, a survey of insurers managing US$10 trillion in assets showed yesterday.

Political events have overtaken issues such as worries about an economic slowdown in the United States or China to become the top macro-economic risk for 2017, according to the survey by Goldman Sachs Asset Management (GSAM) of more than 300 insurers, which together manage about 40 per cent of global insurance assets.

“Political risk has risen to the top of the concerns of all insurers,” Etienne Comon, GSAM’s EMEA (Europe, Middle East and Africa) head of insurance asset management, told a media briefing.

“That’s true globally and even more true in Europe.”

Britain’s vote to leave the European Union and the election of Donald Trump as U.S. President were both unexpected political events last year which have increased worries about protectionism and the reliability of trade deals.

‘Insurers this year are particularly fretting over European elections’ Insurers this year are particularly fretting over European elections such as France’s presidential vote, where favourite Emmanuel Macron is facing a run-off with anti-globalisation candidate Marine Le Pen next month.

Elections later this year in Germany and a possible early Italian vote are also a concern, Comon said.

Increasing volatility in some European government bond markets last year as a result of political upsets and uncertainty encouraged insurers to shift allocations towards safe-haven bonds in Northern Europe, he added.

Insurers expect the biggest returns in 2017 to come from private equity, the fourth straight year they have called this asset class the highest-yielding bet.

U.S. equities and emerging market equities are also expected to produce strong returns, the survey showed.

However, concern over the capital costs of investing in some riskier asset classes mean those return expectations may not turn into more investment, Comon said.

Insurers said they were most likely to increase asset allocation to corporate loans to mid-market firms, followed by infrastructure debt, and then private equity. Reuters

Business Daily Friday, April 28 2017 15

Opinion

Singapore banks could use some Hong Kong property mania Andy Mukherjee a Bloomberg Gadfly columnist

S

table oil prices are fine, and a recovery in the Baltic Dry Index can’t hurt. But seriously, how long can Singapore’s banks remain hostages of the island’s shipping and offshore marine services industry?

That question is bound to be asked as another earnings season comes burdened with a highprofile bankruptcy. Ezra Holdings Ltd., the Singapore-listed offshore services group that sought protection from creditors in the U.S. last month, counts DBS Group Holdings Ltd. and Oversea-Chinese Banking Corp. among its biggest unsecured creditors. United Overseas Bank Ltd., the third of the city’s three home-grown lenders, is on the hook too. The trio’s claims total US$642 million, most of which is unsecured.

Providing for losses on soured corporate debt is one thing; finding new borrowers to replace the duds is another. Mortgages should have been the natural fall-back. Yet, unlike Hong Kong (pictured), which is in the grip of property mania, Singapore’s residential real estate market is comatose after a record 14 straight quarters of declines in apartment prices.

In 2013, developers offered almost 16,000 new homes in Singapore, compared with 11,000 in Hong Kong. Last year’s figure for Singapore was below 8,000, while Hong Kong’s primary sales figures almost touched 17,000 for a third year.

It’s too early to say if a recovery in Singapore’s new per cent home sales in March Big Three’s estimated was anything more share of housing loan than a flash in the market pan.

While bankers rue the absence of a red-hot property market, their salvation is the so-called “net stable funding” requirement. As regulators dissuade lenders from backing a long-term asset like a mortgage with short-term interbank loans, Singapore’s local banks, which get plenty of lazy deposits, have a competitive advantage over their foreign rivals.

Jeremy Teong, an analyst at Phillip Securities Pte, estimates that DBS, OCBC and UOB had roughly 47 per cent of the island’s housing loan market at the end of last year, compared with 43 per cent at the end of 2014. Their market share may increase further in 2017.

However, competing for good-quality mortgage business could also mean sacrificing margins, Teong says.

Hong Kong banks, too, are slashing mortgage rates, but they have the volumes to compensate. Where can Singapore banks find new customers when wage incomes among condo dwellers declined last year?

One answer to that question may be: the government. Even as construction stagnates in the private sector, the public sector could award as much as S$24 billion (US$17 billion) in new contracts this year, up from S$15.8 billion last year, Singapore’s Building and Construction Authority estimates. Given UOB’s dominance of the construction loan market, it might have the momentum to ride this growth, according to Phillip Securities.

Overall, though, the outlook is far from great. Although the three banks’ shares are up between 7 per cent and 11 per cent so far this year, a solid earnings recovery is not in sight. For that, the lenders desperately need more -- and more cheerful -- borrowers.

A Hong Kong-style housing bubble would have been nice. In its absence, bank CEOs will have to amuse themselves with stable crude prices and shipping rates, and hope the carnage in corporate lending is over.

47

Bloomberg Gadfly

A world turned inside out

S

lowly but surely, a bruised and battered global economy now appears to be shaking off its deep post-crisis malaise. If the International Monetary Fund’s latest forecasts are borne out – an iffy proposition, to be sure – the nearly 3.6 per cent average annual growth in world GDP expected over the 2017-2018 period would represent a modest uptick from the 3.2 per cent pace of the past two years. Fully a decade after the Great Financial Crisis, global growth is finally returning to its 3.5 per cent post-1980 trend.

But this round trip hardly signals that the world is back to normal. On the contrary, the overhyped idea of a “new normal” for the world economy overlooks an extraordinary transformation in the global growth dynamic over the past nine years.

At the margin, the recent improvement has been concentrated in the advanced economies, where GDP growth is now expected to average 2 per cent over 2017-2018 – a meaningful pickup from the unprecedentedly anaemic 1.1 per cent average growth of the preceding nine years.

Relative strength in the United States (2.4 per cent) is expected to be offset by weakness in both Europe (1.7 per cent) and of course Japan (0.9 per cent). However, annual growth in the advanced economies is expected to remain considerably below the longer-term trend of 2.9 per cent recorded during the 1980-2007 period.

By contrast, the developing world keeps chugging along at a much faster pace. Although the average growth rate expected for these economies over 2017-2018, at 4.6 per cent, is about half a percentage point lower than during the preceding nine years, they would still be expanding at more than twice the pace of the developed world. Unsurprisingly (at least to those of us who never bought into the Chinese hardlanding scenario), strength in the developing world is expected to be concentrated in China (6.4 per cent) and India (7.5 per cent), with growth lagging in Latin America (1.5 per cent) and Russia (1.4 per cent).

This persistent divergence between developed and developing economies has now reached a critical point. From 1980 to 2007, the advanced economies accounted for an average of 59 per cent of world GDP (measured in terms of purchasing power parity), whereas the combined share of developing and emerging economies was 41 per cent. That was then. According to the IMF’s latest forecast, those shares will completely reverse by 2018: 41 per cent for the advanced economies and 59 per cent for the developing world.

The pendulum of world economic growth has swung dramatically from the so-called advanced countries to the emerging and developing economies. New? Absolutely. Normal? Not even close. It is a stunning development, one that raises at least three fundamental questions about our understanding of macroeconomics: First, isn’t it time to rethink the role of monetary policy?

The anaemic recovery in the developed world has occurred against the backdrop of the most dramatic monetary easing in history – eight years of policy interest rates near the zero bound and enormous liquidity injections from vastly expanded centralbank balance sheets.

Yet these unconventional policies have had only a limited impact on real economic activity, middleclass jobs, and wages. Instead, the excess liquidity

“

Stephen S. Roach a faculty member at Yale University and former Chairman of Morgan Stanley Asia

spilled over into financial markets, sustaining upward pressure on asset prices and producing outsize returns for wealthy investors. Like it or not, monetary policy has become an instrument of mounting inequality.

Second, has the developing world finally broken free of its long-standing dependence on the developed world?

I have long argued that claims of such a “decoupling” were spurious, given the persistence of export-led growth in poorer countries, which tethers their economies to external demand in richer countries.

But the facts now speak otherwise. Growth in global trade slowed to a 3 per cent average pace over the 2008-2016 post-crisis period – half the 6 per cent norm from 1980 to 2016. Yet, over the same period, GDP growth in the developing economies barely skipped a beat. This attests to a developing world that is now far less dependent on the global trade cycle and more reliant on internal demand.

Finally, has China played a disproportionate role in reshaping the world economy?

Chinese rebalancing suggests that this may well be the case. Historically, China’s hugely successful export-led growth strategy, together with the rapid growth of China-centric global supply chains, was the major reason why I never bought the decoupling story.

Yet the export share of Chinese GDP tumbled from 35 per cent in 2007 to 20 per cent in 2015, while its share of global output surged from 11 per cent to 17 per cent during this period. China, the world’s largest exporter, may well be in the vanguard of global decoupling.

This hints at an even more powerful trend: the rapid transformation of China’s industrial structure.

China’s tertiary sector (services) has gone from 43 per cent of GDP in 2007 to 52 per cent in 2016, whereas the share of the secondary sector (manufacturing and construction) has fallen from 47 per cent to 40 per cent over the same period.

While the private consumption share of aggregate demand increased more slowly, largely owing to high precautionary saving (which reflects gaps in the social safety net), there are grounds for optimism on this front as well.

Indeed, the explosive growth of Chinese e-commerce points to a shortcut toward a newly vibrant consumer culture that was unavailable to today’s advanced economies at a similar stage of development. In the annals of structural change, where shifts tend to be glacial, China’s evolution is a sprint.

All of this speaks to a radically different world than that which prevailed prior to the Great Financial Crisis – a world that raises profound questions about the efficacy of monetary policy, development strategies, and the role of China. While some healing of an US$80 trillion global economy is now evident, progress needs to be seen through a different lens than used in past cycles. A world turned inside out, with new dynamism in the developing world far eclipsing lingering malaise in the advanced economies, is new – but hardly normal. Project Syndicate

Like it or not, monetary policy has become an instrument of mounting inequality

”

16 Business Daily Friday, April 28 2017

Closing Luxury

Swiss watch exports break record slump as Hong Kong revives

Adjusted for work days, they fell 2.6 per cent.

Higher demand for Rolex, Omega and Cartier watches is good news for Switzerland, Swiss watch exports ended their longest which gets about a tenth of its exports from slump on record as demand revived in timepieces. Optimism that the worst may be March, leading to the first gain in 21 months over spread amid improving trends in Asia as shipments to Hong Kong revived after a and returning Chinese tourists to Europe slump of more than two years. after terrorist attacks in the region scared Exports rose 7.5 per cent to 1.6 billion francs away travellers. Shipments recorded the (US$1.6 billion), the Federation of the Swiss Watch Industry said in a statement yesterday. biggest annual drop in seven years in 2016 The result benefited from two extra working as high-end timepieces went unsold on retailers’ shelves in Hong Kong, the industry’s days and faced an easier year-earlier comparison, when shipments slid 16 per cent. largest market. Bloomberg News

Tax reform

Yellen may see inflation risk in deficit-busting Trump’s plan She doesn’t want to be seen as an opponent of the President and his plans, but she also wants to avoid a big rise in inflation

W

hat President Donald Trump giveth to the economy with massive tax cuts, Federal Reserve Chair Janet Yellen may be tempted to taketh away with higher interest rates.

With the economy already near maximum employment, the central bank is inclined to use tighter credit to keep the economy from overheating as taxes are reduced and budget deficits increase.

Fed officials, who have pencilled in two more interest rate increases this year and three next, have said they see possible fiscal stimulus as an upside risk to the economy. That risk is only magnified if Trump relies on more government debt, rather than offsetting tax code changes, to finance his cuts, as administration officials have indicated he might.

Trump’s proposal, an outline of which was announced Wednesday by Treasury Secretary Steven Mnuchin and top White House economic adviser Gary Cohn, potentially puts the administration on a collision course with Fed officials who have

almost reached their economic goals and are in the early stages of pulling up ultra-low borrowing costs.

Fed policy makers would have welcomed fiscal stimulus earlier in the expansion that began in mid-2009, when unemployment was still elevated and inflation was well below their 2 per cent target. But now, with the jobless rate at almost a 10-year low and price pressures starting to build, they don’t see a need for a short-term prod from the federal government.

Administration officials have said the president wants to chop the corporate tax rate to 15 per cent from 35 per cent and to levy a 10 per cent tax rate on cash that companies have stockpiled overseas. He also intends to slash individual income taxes, reducing the number of tax brackets to three from seven.

Inflation risks

How the package is financed is important for the Fed. If a middle-income tax cut, say, is paired with limits on how much Americans can deduct from their obligations, then

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the immediate impact on demand and the economy is limited. If it’s not, it’s more likely to give a short-term boost to growth that could lead to a Fed response.

Trump’s budget director Mick Mulvaney said last week that the administration’s focus is on promoting economic growth, not on controlling budget deficits.

Mnuchin has insisted that the tax cuts would be fully paid for. But here’s the catch: Most of that financing would come from an anticipated rise in economic growth -- and the impact that would have on government revenues -- and probably not from such changes in the tax code as the elimination of deductions.

Mnuchin sees growth accelerating to 3 per cent or more from the 2.1 per cent it’s averaged during the eightyear economic expansion.

Sceptical Republicans Even some Republican economists are sceptical of that claim. Donald Marron, who served on former President George W. Bush’s Council of Economic Advisers, said the administration’s estimate of the favourable feedback effects from lower taxes was “surprisingly large,” although he cautioned he hadn’t seen all the details of the plan.

Yellen told lawmakers in February that the central bank wouldn’t necessarily respond to a tax cut package with stepped-up increases in interest rates.

The trouble is that a big deficit-financed package increases the chances of a potentially inflationary spurt in demand, said David Hensley, director of global economics for JPMorgan Chase & Co. in New York.

Of course, it’s far from a lock that Trump’s plans will get through

Funding

Congress, where deficit hawks and budget procedures could lead to a significant scaling back of the president’s proposals.

Delicate position

Fed staffers seem to more or less agree. In December, they lifted their forecast for GDP over the next few years “slightly” to take account of a more expansionary fiscal policy, according to the minutes of that month’s policy-making meeting. The staff saw the stimulative effects of a changed budget stance “substantially counter-balanced” by higher interest rates and a stronger dollar.

Yellen and the Fed are in a delicate position. She doesn’t want to be seen as an opponent of the president and his plans. But she also wants to avoid a big rise in inflation that would damage the economy and tarnish the central bank’s credibility.

The composition of any tax reform plan also matters for the Fed. If the program induces companies to spend more on factories and equipment and in the process lifts productivity, officials have indicated that would be good news for the economy and the central bank. Why? Because in that case the faster growth probably would not spur higher inflation.

It still might eventually lead to higher interest rates, however. Fed Vice Chairman Stanley Fischer estimated last year that a tax cut on the order of 1 per cent of GDP would lift the equilibrium interest rate for the economy by about 40 basis points.

Fed officials have suggested that that rate -- which neither stimulates or slows growth -- is currently close to two per cent. They see it ultimately rising to 3 per cent. Their rate target range now stands at 0.75 per cent to 1 per cent. Bloomberg News

Capital

N. Korea agrees to first ever China’s Didi to raise up rights expert visit to US$6 bln

Australian central banker warns China on outflow controls

North Korea has agreed to host a UN rights expert for the first time, granting access next week to the special rapporteur on disabled people’s rights, the world body said yesterday.

Catalina Devandas-Aguilar is scheduled to arrive in the isolated nation on Wednesday following an invitation from Pyongyang, the UN rights office said in a statement.

Her visit “will be the first ever to the country by an independent expert designated by the UN Human Rights Council,” the statement said.

The rights council has accused North Korea of committing crimes against humanity and detaining up to 120,000 people in brutal prison camps.

The North Korean regime last month boycotted a rights council session scrutinising its record, branding the body’s work a “mere political attack”.

Devandas-Aguilar said the upcoming visit marked a important chance to study the situation in the country, with a particular focus on children living with disabilities.

Pyongyang last December ratified an international convention on the rights of disabled people. AFP

China should be wary of the message investors take away from its clampdown on capital leaving the country as it may be interpreted as concern about the economy, Australia’s central bank chief said.

Reserve Bank of Australia Governor Philip Lowe commended his Beijing counterparts over their efforts to internationalize the yuan, but noted the recent tightening of its capital border, in notes of a speech to be delivered in Sydney yesterday evening. He was speaking at an event on yuan globalization.

“One consideration is the signal that a tightening of controls, after several years of liberalization, could send to investors about how the government perceives the balance of risks facing the economy,” Lowe said. “A broad-based and persistent tightening of capital controls might also exacerbate domestic vulnerabilities, by causing domestic liquidity to be greater than might be desired from a strict macroeconomic management perspective.”

While capital controls have helped Chinese authorities ease outflows, they’ve also undermined China’s quest to make the yuan a global currency. Loosening controls too quickly could fuel more outflows, especially if the dollar strengthens as the Federal Reserve continues raising interest rates. Bloomberg News

Didi Chuxing, China’s top ride-hailing firm, is set to raise up to US$6 billion with a fresh injection of capital from investors including Softbank Group Corp, valuing the company at over US$50 billion, sources said.

Other investors in the fund raising round include private equity firm Silver Lake Partners, China Merchants Bank and Bank of Communications, two people familiar with the matter said.

They declined to be identified because they are not authorised to speak publicly. Didi Chuxing declined to comment.

The last valuation for Didi was US$34 billion in August when it agreed to acquire Uber Technology Inc’s China business following a drawn-out rivalry between the two firms. The deal gave Uber a one-fifth stake in Didi.

At US$50 billion, Didi’s valuation is propelled well above that of Chinese smartphone maker Xiaomi Inc, which held the title of China’s most valuable startup after a 2014 funding round put it at US$46 billion.

Ant Financial, China’s most valuable private internet finance firm and an affiliate of Alibaba Group Holding Ltd , is valued upwards of US$60 billion. Reuters